Why pay tax on a critical business expense such as Ransom?

That’s right! In a landmark judgement by the High Court of MP, Ransom money was considered as a business expense allowable for a tax rabate!

One day Khemchand Motilal Jain, went to buy tendu leaves from the forest, which is raw material for his Beedi manufacturing unit. On the way, he got abducted by the dreaded Raju Bhatnagar’s gang and had to pay over half a million rupees as ransom for his freedom. Jain filed Rs. 5.50 lacs ransom as “General expenses” for seeking tax rebate under Section 37 of the Income Tax Act, 1961 while filing his IT returns which obviously raised quite a controversy.

Interestingly, there were conflicting opinions within members of the IT (Income tax) department and the matter was referred to the High Court of Madhya Pradesh. Amongst others, the high court validated following key points before allowing the tax rebate:-

a. It is NOT an illegal expense

Kidnapping for ransom is an offence u/s 364 A of the Indian Penal Code (IPC), however the payment of ransom to secure the release of a kidnapped person is not an offense or prohibited by law.

b. It WAS on grounds of Commercial expediency

Jain was a whole time director of the business and the amount was towards his release and expediency. The amount paid was towards avoiding harassment, in this case saving the life of the Director and resume business operations.

Such a judgement does restore faith in the Indian Judiciary system however, this has the potential to open flood gates to a whole lot of new issues. We know some tax payers could go to any limits to avoid paying money to the government. Perhaps a rise in misuse of the provision by staging false cases of kidnapping and other speed money arenas. Perhaps, paying a bribe can be challenged to be no different from paying Ransom and draws the same rebate. Perhaps, this becomes a new line of crime for some unemployed youth in the suburbs having a new “Business logic”. Maybe high profile criminals agree on wire transfers to foreign banks.

The question is:

Should the citizens be given tax benefits by the Government for the amounts paid in overcoming the lack of governance & peaceful existence ? What an Irony!

Disclaimer: The above article is based on my interpretation and personal views on the cases mentioned. It is not intended to be read as facts or contempt of any court’s ruling and merely for sharing a viewpoint.

“I am Anna! You are Anna!”

“Down with Corruption!”

These are some of the slogans you would hear from many Indian citizens across the country who are agitating with Anna Hazare against the political parties with the objective of passing a new Lokpal (Public Ombudsman) bill in the Parliament. The cause of Anti-corruption is virtuous, unanimous & about time to be invoked.

But, when you look a little deeper and you will find faux & fable perceptions.

The hapless Indian middle-class, who are decent folks looted by the corrupt politicians. We are all saints and those netas are the enemy.

The hard fact remains that there is No such citizen who hasn’t preferred to choose an immoral path at some points of their life. The largest tax paying segment is this middle class where employees, proprietors, professionals et all fake bills, pay “Black money” to buy a property, give donations to unscrupulous trusts & “Manage” expense accounts to save tax. The fact is that Most businesses cannot even survive, leave alone compete, if they didn’t hide real earnings and grease hands of several government agencies.

So, Who are these selfless angels riding the anti-corruption crusade?

“Filmstars” with their stealthy income, “Parents” who have “Alternative” means for school admissions, “Students” who “Skilfully” escape traffic cops, “Shop-owners” without legitimate bill books, “Landlords” who take part cash rentals, show agriculture income, “Lawyers” & “Chartered accountants” who preach “Ways” of survival in this poor country led by cruel politicians. The mere mention of “Corruption” will make us instantly agitate.

The hypocrisy is comical and melodramatic.

Corruption is an evil! But the Politician is a just a minor element.

Charity begins at home! To fight this evil, the “Honest Indian” has to look within and take the Uncomfortable stand.

I have this strange feeling that the real Mahatma Gandhi would have agreed with this approach. 🙂

What started as a hacking bid four months ago, ended as the biggest brawl in internet history this week, when Google routed its 140 million Chinese visitors from Google.cn to their “Uncensored” Hong Kong site.

Google officially claimed to have uncensored its “Search services” – web search, news and images. Yet, the retreat is only partial, as Google shall retain most of its existing operations including its research and development team, local sales force and continue to operate the online maps and music services.

Knowing that Technically, it’s still very easy for the Chinese government to continue blocking Google’s services, Google conveyed that they are closely monitoring such activity and that such actions will directly impact Google’s remaining local employment in Mainland China.

Google announced its decision with carefully chosen words, balancing the sentiments of Chinese netizens on grounds of Google’s mission to free speech and yet avoid a possible Chinese government’s backlash on their local officials.

Contrary to popular belief, “Censorship” is NOT the prime reason for Google’s exit. After all, while entering the Chinese market in 2006, Google had themselves agreed to such compromising conditions, in their race for capturing an exploding internet population. The systematic and targeted hacking of Gmail accounts, theft of their source codes , accusations of spying on behalf of CIA, lack of intent in the actions of the government against such crimes and most importantly – a clear inclination of the government towards homegrown players, over a prolonged period of time culminated to such a major decision.

So, how does this impact Google Inc. ?

Market share:- Google’s share in the Chinese search market is just one third, with the local player – Baidu still holding the lion’s share at 58%. i.e. 140 million of the 400 million Chinese internet subscribers. Baidu and Bing will definitely see an upside with this development.

Immediate Impact:- Already, in the last three months, Google’s stock price has fallen by 1.5% as against Baidu’s rise of 15%.

Opportunity loss:- Some analysts’ feel the opportunity loss for Google in the next 5 years is estimated to be about $ 400 million revenue income from China, which is quite insignificant against their overall global plans. Their may be a blip in Google’s Android handset launch in one of the fastest growing telecom markets in the world.

Thanks to Baidu‘s strength in China, they stand in the 3rd place in worldwide internet search with 7% share, only after Google (67%) and neck to neck with Yahoo (8%). Microsoft sites are at a distant 4th position with 3% share (which is now gaining traction with Bing).

Google’s decision to quit China understandably affect Google’s shareholder’s, as one can easily feel jittery leaving out the most populous country in the world. However, Google’s fundamentals are strong. The Google success story was never about China. With the recent global economic turmoil, Google has just about scratched the surface of the immense potential advertising revenue it can get when company’s migrate from traditional to digital means of advertising in rest of the world. Also, Google has only done a “Partial” retreat. Their plans for Android, etc. in China are yet unchanged.

The impact on China & their strategy?

Credibility & Sovereignty: China’s stance on the topic is very clear. To preserve their culture and control on public information, all media in China (by law) is censored by the government and Google is no exception. After all, how would the US react if one fine day Yahoo Corporation were to stand up and say they did’nt care about US cyber laws? The problem is that China goes to any extent in meeting such objectives, which includes but does not limit to the use of force, stealth & mercenary tactics even. They are also highly nationalistic while dealing with foreign players in their country (Especially US corporations).

Internet & mobile user base:- China has a 28.9% internet penetration with a whopping 400 million subscribers. A large quantum of these (140 million) are Google users. ‘China Mobile Ltd. – the world’s biggest phone company by subscribers, with 527 million accounts, also uses Google for mobile search and maps.

Local players & their impact:- Tencent (Instant messaging), Alibaba (B2B trade), Taobao (Ecommerce)& Baidu (local search) are already leading business players. With Google’s departure, Baidu will grow stronger in internet search. As Youtube exits, Youku and Tudou will gain advantage… But, without global competitors, they will never become World class.

Local Entrepreneurs:- Another significant impact of a Google departure could lie behind the scenes, where many small Chinese companies, & entrepreneurs, rely on its AdWords advertising service, Gmail e-mail and documents services.

Unemployment:- With an explosive population in Mainland China & growing unemployment, such steps will isolate the country from the Global economy and limit the country’s economic growth.

Curiosity amongst Chinese Netizens:- It may be easy for the government to allow Google to shut shop, but telling 140 million people to suddenly change their behavior because the government wants to hide information from them, will not be a cake walk. China may have to deal with great tact to contain the growing curiosity amongst such a vast population. What if they were to find out? My belief is that China will not unplug Google- Hong Kong’s access, but continue censorship and deteriorate their speed & quality such that users gradually migrate to alternate options.

Rampant Piracy:- Interestingly, Google (in a Chinese JV) also runs Top100.cn – which provides free music downloads across many labels in an unlicensed manner. There are doubts on the company’s future operations too. Top100 has been instrumental in reducing the Piracy in China which could suffer a dent for the industry as “Piracy thrives on censorship”.

The numerous chocolates, flowers & parting notes left on the Google’s signboard in Beijing office expresses a popular sentiment. Google’s dramatic exit from Mainland China, is no longer a clash between two rivals, but a more symbolic moment in history, which is bound to have an economic, political, technical and fundamentalist impact in the world over in coming times. This could even become a turning point in China’s communist policies, as well as a revision in defining “A Free World”… and each one of us will feel it.

What do terror strikes in Mumbai, New York, Delhi, London, Jaipur, Paris, Russia, Afghanistan, Nepal & Iraq have in common? “Pakistan” and its links. And yet, lack of evidence and proof are buzz words to buy time. Even though Pakistan is under pressure from India, USA & Israel to rage an urgent war on terrorist outfits breeding in their country, is this really the best option they have?

Come to think of it, one cannot realistically expect Pakistan’s Civilian government to rage this war on terror for a number of reasons. They are newly elected, have little control over their own Army – which is threatens a coup , already under criticism & struggling on their offensive on western front with Al Qaeda factions – they once help establish, a beleaguered economy with immense curruption pleading a bail-out from IMF , confused sentiments on deciding friends & foe and a now being cornered to capture & extradite other terrorist factions on their eastern front.

Even if the terrorists from the “India’s Most wanted” list were to be handed over, it will expose their government’s depth of support and seal their fate as a “Terrorist state” which is what really explains Pakistan’s refusalto hand them over. Afterall, what is the Pakistan minister trying to defend when he says they are “…Ready for a war on India” ? … the terror camps in PoK? With a sword hanging on their heads, perhaps a war with India is their only remaining option. This can potentially get them public sentiment on soveriegn grounds, unification with mercenaries who will actively fight against India, perhaps even cause historic damage with their nuclear misadventures and most importantly divert the whole agenda of abetting terrorism.

While this may be just a point of view, its only fair to set expectations from Pakistan to avoid procastination, heart burn and prepare for a united war against terrorism and those abetting terror. Its for global leaders to stop talking and unite in fighting this war on ground. This is not the bilateral issue of Kashmere anymore, its not a war against a nation, its a multilateral issue of global terror and this time the biggest democracies have spoken their sentiments loud enough.

Mumbai is not new to terror attacks and gang wars. The 26/11 terror attack however, in many ways has introduced a new face of terror. The city’s gentry which always felt secured in the luxury of five star hotels had to face an ordeal they had never imagined. Gone are the days when a terrorist was perceived to be illiterate, elderly, covered his face, used crude makeshift weapons and was often conspicuous in elite areas.

Terror in Mumbai

The modern day terrorist is much dangerous & global. These guys are highly trained in modern combat with sophisticated weaponry, speak fluent English, have detailed strategy to hit targets, have sleeper cells, wear urban & youthful attire, experts in cyberspace management and more ruthless than ever before. It was shocking to see their meticulous planning being implemented and how they managed to keep the highly trained commandos at bay for nearly 60 hours. Global leaders now realize that they are not immune to terror strikes anymore and if they don’t plug it right away, they will soon be at the receiving end. It is imperative for a strong polictical will to be formed and unified action be taken. However, a genuine thought crosses the heart – should only the governments be responsible to counter such terror? When have we last stopped to help an injured person on the road? When did we last sound an alarm when something suspicious happened in the neighbourhood? If we are not immune to such acts of cruelty, should we not come together to help each other? Should the politicians just be allowed to take cheap publicity from such carnage? If such dramatic change in extremism needs a major change in human attitudes, are we really ready to counter the new face of global terror?

Update: A recent story on IBNlive quoting Washington Post’s article that describes the recent recruitment trend of terror outfit (Lashkar). This further ratifies the new face of global terror. Some excerpts…

“The profile of those joining the militant group Lashkar-e-Taiba is changing,” the Washington Times said citing Brig. Gen. Mahmood Shah, who served the Pakistani Army in the largely ungoverned tribal areas along Pakistan’s porous border with Afghanistan. “We have doctors and engineers and computer specialists working for us,” says a militant commander.

When Senator Obama created history in being nominated and winning the US Presidential election by a landslide margin, it indicated a much larger “Change”. Not very long ago, blacks in America were treated with extreme prejudice, were desisted to cast their vote and it was unthinkable for a colored man to even contest for the most powerful position in the world. Obama’s election reflects this drastic “Change of mindsets” of the US citizens at large, on how they now perceive the black community, the foreign migrants, the young leaders and the civilian population.

The Americans are such a dynamic & resilient community that they have together emerged in unprecedented majority to support Obama in anticipation of drastic changes that the nation needs at this time of crisis. The sheer election of this candidate is likely to infuse confidence in the American public and create lessons in history for generations to come. Globally, while the nations now wait to see how Obama takes his next steps to curb recession, spread peace and encourage free trade. McCain supporters will perhaps have no other choice but to overcome their inhibitions in interest of the nation to support their new president. With this choice, USA has now fully matured to command respect of being the most developed nation and perhaps a lesson for many developing countries on how to overcome internal cast-ism & discrimination in the race to survive and flourish. CHANGE, we surely need!